When you annuitize a variable annuity, you take the risk that you might die right away, and the payment stream will end. Some contracts now offer living benefits that don’t require annuitizing.

As an alternative to annuitization, guaranteed minimum withdrawal benefits (GMWBs) are gaining in popularity. In essence, consumers are promised that they can gradually withdraw the amount that they invest in a variable annuity, no matter how their investment accounts perform. If you invest, say, $100,000, you might be able to withdraw $5,000 per year for 20 years, even if your investment accounts have lost money.

Systematic withdrawals not only are easier to understand than annuitization, they offer the possibility of leaving something for the next generation. There generally is a price you must pay for such guarantees in a variable annuity, though, so it pays to investigate thoroughly before buying.